QUESTION $1(25$ MARKS$)$

Prime T Wholesale Group is the exclusive wholesale distributor of 'Organic Traditional Tea' produced in one of the industrial areas in Pahang. The tea is sold in individual $500$ ml cups priced at RM$12\mathrm{.}00$ each. As part of the development of the company's financial strategy for $2025,$ the president has gathered all relevant data on projected operations as follows:

Expected sales volume

Variable cost:

Cost of tea

Cost of labour

Selling and distribution

Administrative expenses

Other overhead expenses

$120,000$ cups per annum

RM$4\mathrm{.}00$ per cup

RM$2\mathrm{.}00$ per cup

RM$1\mathrm{.}50$ per cup

RM $200,000$ per annum

RM $60,000$ per annum

Additional information:

$30\%$ of the administrative expenses are variable costs and the remaining are fixed costs.

$60\%$ of the other overhead expenses are fixed costs and the remaining are variable costs.

Required:

a$)$ Determine the variable cost per cup and the total fixed costs for the company. $($Show all workings.$)$

$(6$ marks$)$

b$)$ Calculate the following:

i$.$ Break$-$even point in cups and sales value

$(4$ marks$)$

ii$.$ Total net profit for the year

$(5$ marks$)$

iii. Contribution per sales ratio

$(2$ marks$)$

iv$.$ Margin of safety in cups

$(2$ marks$)$

c$)$ The president has decided to increase the advertising cost by RM$2,000.$ The main supplier of the tea has agreed to further markup the cost of tea by $1\%$ per cup. What will be the impact of these changes on the company's net profit?

$(4$ marks$)$

d$)$ State TWO $(2)$ limitations of cost volume profit analysis.

$(2$ marks$)$